ASHOK LEYLAND FINANCE LIMITED Vs. APPROPRIATE AUTHORITY

JUDGEMENT

(1.) AN agreement styled as 'agreement for development' was entered into between P. Nataraja Sastry and Ashok Leyland Finance Limited on 30th April, 1990 wherein the subject matter of the agreement was described as "88 per cent. of the undivided share and interest in the Schedule A property to be conveyed to the party of the second part and or to its nominee or nominees".

(2.) THE agreement sets out that the owner is in possession of the property; that the property was self-acquired under a sale deed dt. 28th September, 1965; that the owner had decided to develop the property by demolishing the existing bungalow on the land which was a very old and build a conglomeration of flats on the land; that the offer made by the party of the second part for development of the land had been accepted by the owner; that the owner had secured eviction of the tenants who were in occupation of the building only with 'the intervention of the party of the second part; that the party of the second part had agreed to develop the property even in the absence of the original of the parent document being available; that the parties had earlier entered into an agreement on 23rd December, 1989 and had also filed Form 37-I before the appropriate authority, the IT Department, Chennai, which form was rejected by the authority on 9th March, 1990; that thereafter, the parties agreed to enter into this agreement in supersession of the earlier agreement; that the owner had retained for himself a portion only of the said conglomeration together with the proportionate undivided share in the land amounting to 12 per cent. and sell the balance undivided 88 per cent. share in the land; that the owner had decided to entrust the construction and sale of the flats apartments/garages/shops offices/etc. to be built on the land to the party of the second part; that pursuant to the agreement reached between them the second party was authorised in the capacity of promoter to take steps immediately for the preparation of the plan and after securing necessary approval proceed with the construction; that the second party was authorised to sell constructed space together with the proportionate undivided share in the property for any consideration on terms and conditions to be determined by the second party who was to receive and appropriate for itself all such considerations or moneys except for an area of 2740 sq.ft. of built up area which was to be constructed for the owner and delivered to the owner as part of the consideration for the sale of 88 per cent. interest in the land to the second party or its nominees; that the owner would execute and register power of attorney in favour of the second party to enable it to complete the construction and to sell all the constructed area excluding 2740 sq.ft. that the second party was to complete the construction within 15 months; that the owner would not create any encumbrance in the property after the date of agreement; that the building to be constructed excluding the area of 2740 sq.ft. was to vest absolutely in the second party or its nominees at all times; that the second party was entitled to raise loans on the security of the building to be constructed on this property; and that the owner would execute and register sale deeds in favour of the nominees of the second party whenever called upon.

(3.) CHAPTER XX-C of the Act was introduced with the avowed object of ensuring the payment of tax properly payable on the market value of the immovable property transferred inter vivos. The Supreme Court in the case of C. B. Gautam vs. Union of India , upheld the validity of the provisions providing for pre-emptive purchase, after finding that the provision was intended to ensure the payment of tax properly payable on the market value of the immovable properties transferred and that such transfers are not to be allowed to become means for evading substantial part of the taxes lawfully payable on the market value. A rebuttable presumption that the parties intend evading tax would arise if the apparent consideration for the transfer as set out in the agreement is found to be less by 15 per cent. or more of the market value of the property.